Andrew Wilkinson: The Hardest And Easiest Businesses To Start

Episode Summary

Executive Summary: Andrew Wilkinson reflects on the relative difficulty of different business models, arguing that asset-light internet businesses and job boards are easier than agencies, SaaS, or brick-and-mortar. He reviews lessons from his failed ventures, explains why Buffett-style operator-investors succeed, and outlines new founder-focused ideas like Tenzing and targeted advertising, while criticizing venture incentives, smart-money mythology, and fraud-ridden public-market promotion.

Main Topics: Business model difficulty spectrum (Priority: 5/5): Wilkinson ranks businesses from easiest to hardest: simple internet/job-board businesses are easiest, agencies are medium, and brick-and-mortar, physical goods, and employee-heavy businesses are hardest due to coordination and inventory complexity. Postmortems on Wilkinson's ventures (Priority: 5/5): He walks through prior businesses like Pixel Union, HJ Muse, Famous Original, MeLime, Flow, AeroPress, and WeWork Remotely to show what worked, what failed, and what lessons each taught about capital allocation and operations. Buffett as operator-investor (Priority: 4/5): The discussion uses Buffett’s Sees Candy letter to show that great investors can also be hands-on operators who influence merchandising, branding, and acquisitions, not just spreadsheet allocators. New business ideas and Tenzing (Priority: 5/5): Wilkinson describes starting Tenzing, a modern investment-banking/realtor-for-businesses service for bootstrap founders needing exits, debt, secondaries, or M&A guidance, plus a targeted-advertising idea to reach one specific buyer. Critique of venture capital incentives (Priority: 5/5): He argues VC firms often get rich on management fees and promotional upside even when investments underperform, and that founders can be harmed by raising at unrealistic valuations. Fraud, hype, and broken signals in markets (Priority: 4/5): The conversation covers FTX, SPACs, Canadian public-market promotions, Nikola, Bird, and esports stocks as examples of hype, weak diligence, and legal but misleading capital-marketing behavior. Learning through failure and second chances (Priority: 4/5): Both speakers emphasize that business and investing are iterative: failures teach business-model reality, and there are often second chances on the train if an idea or asset is genuinely good.

Key Arguments: Asset-light, internet-native businesses are easier because they require little capital, few employees, and can scale without physical logistics. Agencies are medium difficulty: they are scalable and low-capital, but feast-or-famine demand and culture constraints make growth hard to manage. Brick-and-mortar and inventory businesses are far harder than they appear because coordination, labor, and replenishment can erase paper profits. Buffett succeeded not just as an investor but as an operator who improved businesses through merchandising, branding, and strategic advice. Founders often lack access to finance expertise, so a founder-friendly banking service like Tenzing can create real value by translating capital options. Venture capital is structurally misaligned because firms earn guaranteed fees and can profit from promotion even when LPs lose money. The presence of famous investors is not reliable due diligence; conviction must be built independently rather than outsourced to status. Public-market promotion can be legal yet predatory when bankers package tiny or weak businesses as hot trends and dump them on retail investors. Many business failures are useful lessons, and a weak business model should not be confused with a weak entrepreneurial instinct. Even great investors make bad calls; the lesson is to inspect incentives and business quality rather than assuming reputation equals truth.

Data Points: Pixel Union monthly revenue: $10,000 per month - Early Tumblr-theme business revenue after launching premium themes Pixel Union sale price: $7 million - Amount Wilkinson says he sold Pixel Union for in 2014 Pixel Union profit at sale: $500K net profit - Approximate annual profit around the time of sale Pixel Union growth rate: 50% per year - Wilkinson’s description of the business growth when he sold it Pixel Union buyback price: $26 million - Price paid when Tiny repurchased the business WeCommerce valuation at public listing: $260 million - Valuation when Pixel Union/WeCommerce was taken public after acquisitions AeroPress acquisition: Not stated in transcript - Wilkinson discusses buying AeroPress and hiring a new CEO, but no purchase price is given Bakery workforce: 40-50 employees - Wilkinson cites this as an example of how hard brick-and-mortar businesses are to coordinate HJ Muse investment: $300K - Money Wilkinson says he poured into the cat furniture e-commerce business before shutting it down HJ Muse margins: 2%-3% EBITDA - Approximate margins for the cat furniture business versus higher-margin agency/software businesses Agency margins: 30%-50% EBITDA - Wilkinson contrasts agency margins with e-commerce margins Flow loss: $10 million - Capital lost building project management software to compete with Asana Remote job board acquisition: Bought from Jason Fried and DHH - WeWork Remotely was acquired and grown with a small team MeLime sale: Tens of millions of dollars - Wilkinson says the business was sold to Albertsons for a large undisclosed amount FTX bet by Paradigm: $290 million - Referenced as a large venture bet written down to zero Venture fund fee example: 2% of $1 billion = $20 million/year - Wilkinson argues large venture funds can make enormous risk-free fee income Canadian R&D credit: 30% - Government subsidy Wilkinson says he failed to claim, costing him significant tax credits EGLX stock price collapse: $8.59 to $0.84 - Example of a Canadian public-market hype stock falling sharply EGLX market cap: $126 million - Approximate market capitalization mentioned after the decline Bird capital raised: $883 million - Amount discussed as total raised by Bird scooters Bird public valuation: $3 billion - Valuation at public listing before the stock’s collapse Bird current market value: $70 million - Approximate market cap discussed for Bird after decline Venture round example: $10 million valuation / $5 million fallback - Wilkinson’s non-binary term sheet structure for Supercast

Pivotal Quotes: "the hardest possible businesses are brick and mortar or where you have to move physical goods and you have a lot of employees" — Andrew Wilkinson: Ranks business-model difficulty at the start of the discussion "I think the theme for me is that I will often do the wrong business before I find the right business" — Andrew Wilkinson: Summarizing his pattern of learning through failed ventures "you cannot outsource your conviction" — Andrew Wilkinson: His key takeaway from criticizing VC and smart-money signaling

Implications: Listeners should be skeptical of prestige-driven investing and choose business models carefully. The episode argues for founder-friendly capital, stronger diligence, and humility: good businesses can be simple, while flashy trends and famous backers can still be bad bets.